The Jyoti Structures case at NCLT will be a good test of the Insolvency and Bankruptcy Code in tackling bad loans at banks. Photo: Bloomberg

Mumbai: The National Company Law Tribunal (NCLT) on Tuesday approved bankruptcy proceedings for power infrastructure company Jyoti Structures Ltd, making it the first among the 12 cases referred by the central bank under India's new Insolvency and Bankruptcy Code (IBC).

The tribunal's order came on an insolvency application filed last week by the company's lead lender State Bank of India (SBI). According to NCLT filings, the company has total debt of Rs7,000 crore.

“As the company is not opposing, the application is approved,” said B.S.V. Prakash Kumar, presiding member, NCLT.

On Tuesday, the tribunal also approved consulting firm BDO India to manage Jyoti Structures in the interim, as suggested by SBI when the case was last heard on Thursday.

On 13 June, the Reserve Bank of India (RBI) directed banks to refer 12 troubled companies with a combined debt of close to Rs2.5 trillion to the NCLT. Of them, creditors have moved the tribunal against Jyoti Structures, Monnet Ispat Ltd, Electrosteel Steels Ltd, Essar Steel Ltd and Amtek Auto Ltd.

When the tribunal heard the matter on Thursday, counsel for Jyoti Structures did not raise any objections on the proceedings, but had mentioned an offer from a prospective buyer.

“A proposal from a prospective buyer is in the offing, which is a going concern. We request that the same should be considered and tabled before the insolvency resolution professional once the insolvency proceedings start and later to the committee of creditors,” said Amit Vyas, counsel for Jyoti Structures.

Jyoti Structures was one of the power sector firms hit by a lack of fuel linkages or trouble in completing land acquisition. Lenders invoked RBI’s strategic debt restructuring (SDR) norms in 2015 and restructured its debt outside the provisions of SDR. Since then, banks have been trying to sell their 51% stake in the company with no success.

Animesh Bisht, a senior associate at law firm Cyril Amarchand Mangaldas, who appeared on behalf of SBI, said all proposals for resolution would be considered, and that the governing plea is a master restructuring agreement begun in September 2014.